# Battling online fraud in a post-EMV world: what can the US learn from Europe?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-06-02
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Fraud Prevention Tips for Financial Institutions in the
Meta Description: Learn from Luke Reynolds, Director of Fraud at Featurespace, about the impact of changing payments on fraud, and how to prevent it without sacrificing customer
URL: https://financedigest.com/battling-online-fraud-in-a-post-emv-world-what-can-the-us-learn-from-europehtml

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**Luke Reynolds, Director of Fraud,** [www.featurespace.co.uk](http://www.featurespace.co.uk)

 Luke Reynolds

Payments are changing fast – as soon as financial institutions and their merchants get up to speed, another change seems to be approaching. We saw it when Chip-and-Signature arrived in the US at the end of 2015, and with contactless and mobile payments which are becoming an increasingly popular choice for both merchants and consumers across Europe.

Europe, including the UK, is ahead of the curve in knowing the impact – positive and negative – of implementing EMV, having tackled the issues since the mid-2000s.

So, what can US financial institutions learn from the experience of Europe?

**Criminals look for the weakest links**

We know that criminals always look for the easiest targets when committing fraud. By [studying what’s happened post-EMV in other markets](https://www.financedigest.com/global-market-study-on-battery-pack-for-marine-hybrid-full-electric-propulsion.html "Global Market Study on Battery Pack for Marine Hybrid & Full Electric Propulsion"), financial institutions and their merchants can reduce their risk of higher fraud losses with minimal impact on customer experience.

**Changing payments push-up** [online fraud](https://www.financedigest.com/three-online-fraud-trends-beauty-and-cosmetics-merchants-should-watch-out-for.html "Three Online Fraud Trends Beauty and Cosmetics Merchants Should Watch Out For")

Having worked for over 20 years in risk and [security in the banking sector](https://www.financedigest.com/what-does-good-look-like-for-legal-sector-it-security.html "What does ‘good’ look like for legal sector IT security?"), I was at the centre of managing changing fraud trends in the early 2000s, when the UK and Europe moved to Chip-and-PIN. Online fraud was suddenly perceived as the weakest link for criminals, who moved to this channel for the biggest fraud ‘rewards’.

We’re seeing it happen again in the US. It was recently reported on PYMNTS.com that online fraud has already increased [11% since](https://www.financedigest.com/uk-economy-shrank-record-11-in-2020-worst-since-1709.html "UK economy shrank record 11% in 2020, worst since 1709") Chip-and-Signature cards were introduced in October last year.

**Don’t let fraud prevention drop in priority**

In my experience, as financial institutions and their [merchants get to grips with new payment](https://www.financedigest.com/embedded-payments-for-b2b-merchants-and-marketplaces-4-considerations.html "Embedded payments for B2B merchants and marketplaces: 4 considerations") processes, fraud prevention drops down the priority list.

What this means is that instead of improving the customer experience, changes to [payment processes negatively impact](https://www.financedigest.com/why-it-pays-to-pay-on-time-the-impact-of-delayed-payments-on-supplier-relationships.html "Why it pays to pay on time: The impact of delayed payments on supplier relationships") the customer. As well as increasing the chance of fraud attacks, this causes increased customer friction by unnecessarily blocking genuine transactions as [payment methods and spending patterns change](https://www.financedigest.com/why-contactless-has-changed-the-face-of-payments-in-the-uk.html "Why contactless has changed the face of payments in the UK").

[Merchants also get impacted](https://www.financedigest.com/how-does-the-fca-deadline-extension-impact-uk-merchants.html "How Does the FCA Deadline Extension Impact UK Merchants?") – criminals move to the smaller merchant targets who do not have sophisticated fraud protection. These [merchants cannot afford the resulting chargeback costs and fraud](https://www.financedigest.com/merchants-are-the-first-line-of-defence-against-fraud-heres-how-we-can-help-them.html "Merchants are the first line of defence against fraud: here’s how we can help them") losses – not to mention the loss of revenue from declined transactions (false positives).

**Blocking genuine customers can’t be a [cost of stopping](https://www.financedigest.com/trend-micro-vision-one-stops-threats-faster-streamlines-operations-and-cuts-costs.html "Trend Micro Vision One Stops Threats Faster, Streamlines Operations and Cuts Costs") fraud**

It’s a genuine problem for both customers and merchants when good customers are blocked in an attempt to catch fraud. According to [recent research](https://www.financedigest.com/recent-research-in-vitro-toxicology-testing-market-to-witness-steady-growth-at-5-6-cagr-by-2017-to-2022.html "Recent Research: In Vitro Toxicology Testing Market To Witness Steady Growth At 5.6% CAGR By 2017 to 2022") from MasterCard, it’s often the most affluent customers that get blocked – those who are travelling more frequently or making purchases with larger transaction values. These customers get blocked by fraud systems which [rely on outdated methods of pattern-matching behaviour against business](https://www.financedigest.com/why-do-the-famous-names-in-business-rely-on-mentors.html "Why do the famous names in business rely on mentors?") rules.

**Reducing customer friction: advanced fraud** [management needed](https://www.financedigest.com/looking-to-buy-a-rental-property-heres-why-you-need-a-property-manager.html "Looking to Buy a Rental Property? Here’s Why You Need a Property Manager")

What I’ve learnt from over 20 years battling fraud, is that financial institutions need fraud systems which [keep one step ahead](https://www.financedigest.com/dutch-governor-knot-signals-ecb-will-keep-raising-rates-in-months-ahead-ft.html "Dutch governor Knot signals ECB will keep raising rates in months ahead- FT") by understanding every individual customer’s behaviour in real-time – protecting them from fraud, while providing a frictionless experience.

**Sophisticated [machine learning](https://www.financedigest.com/machine-learning-in-artificial-intelligence.html "Machine learning in artificial intelligence") systems**

It’s one of the main reasons why I moved to Featurespace, who have a totally unique way of solving this problem with a [machine learning engine](https://www.financedigest.com/machine-learning-engineer-jobs.html "Machine learning engineer jobs") – enabling organisations to balance robust fraud checks with a frictionless customer experience.

By viewing events in context and by building a deep understanding of every single customer, monitoring every event and transaction taking place in real-time and from multiple channels, fraud attacks stand out and genuine customers are easy to recognise.

It’s an approach which we’re implementing for TSYS, the largest payment processor in the United States. TSYS wanted to strengthen its position in faster payments using [machine learning to provide clients with actionable insights](https://www.financedigest.com/vibratory-feeder-machine-market-insights-deep-analysis-of-key-vendor-in-the-industry-2019-2029.html "Vibratory Feeder Machine Market Insights, Deep Analysis of Key Vendor in the Industry 2019 – 2029") in real-time. Featurespace will protect TSYS’ clients from fraud while providing a seamless customer experience.

**Staying one step ahead**

Financial institutions can learn from Europe’s experiences, that it is possible to stay ahead of the criminals. It’s [important to take action now to reduce fraud](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD") while providing frictionless customer experience and protecting revenue.

New methods of payments make customer’s lives easier, and generate more revenue for the financial institutions [providing the service](https://www.financedigest.com/can-companies-minimise-their-dependency-on-cloud-service-providers.html "Can companies minimise their dependency on cloud service providers?"). It’s up to organisations to embrace new fraud systems to [gain a vital competitive edge](https://www.financedigest.com/using-cloud-based-communications-to-gain-a-competitive-edge.html "Using cloud-based communications to gain a competitive edge") in protecting their customers and their reputations.


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